Recap of India M&As 2023 - Decline, Downturn, Distress

Global M&A activity declined by 17% to a 10-year low at $2.9tn worth of transactions. Geo-political tensions amid three wars, high-interest rates across various economies and the sustained funding winter have all weakened the investment climate for startups and companies seeking to raise fresh capital. All these factors led to a worrisome trend being witnessed in global M&A, possibly the worst performance since 2013.

Meanwhile, India M&A activity fell to a three-year low in 2023 at $84bn in 2023, a decline of 51% from $170bn in 2022 and a decline of 32% from $123bn in 2021. Taking out the HDFC Bank-HDFC $60bn jumbo deal in 2022, the yoy deal value comparison would be a decline of 23%.

• Domestic M&A activity: $52bn (decline of 56% from 2022)
• Inbound M&A activity: $25bn (decline of 36% from 2022), the lowest since 2015
• Outbound M&A activity: $6bn (decline of 40% from 2022), with the US being the most-targeted nation
• PE-backed M&A activity: $13bn (decline of 61% from 2022), the lowest since 2020
• Sector-wise M&A activity: The financials sector saw the highest activity at $31bn (decline of 56% from 2022); followed by Industrials at $13bn (decline of 9% from 2022); and High technology, which saw the greatest number of deals announced, with $9bn worth of deals (decline of 59% from 2022)
• Number of deals: Minimal 1.7% decline from 2022, indicating that a healthier level of mid-market transactions dominated the market

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Key Themes in the Indian M&A Landscape in 2023, a continued saga from 2022

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Big moves from the Strategic Buyer ecosystem

• Suraksha Realty <> Jaypee Infratech for $2.5bn: Jaypee Infratech owns the Delhi-Agra Expressway and land on both sides of the expressway. The Corporate Insolvency Resolution Process (CIRP) against Jaypee Infratech was started in Aug-17 over an application by an IDBI Bank-led consortium
• Proximus <> Route Mobile (58% stake) for $721m: With the acquisition, Proximus became the 3rd largest player globally, with a vastly expanded customer outreach. Proximus' CPaaS portfolio extended with Route Mobile capabilities, notably in omnichannel, to capture Gen AI-based revolutions in customer engagement
• Nirma <> Glenmark Life Sciences for $689m: Nirma Group has entered the API sector with its recent acquisition of Glenmark Life Sciences, expanding its existing pharmaceutical portfolio of Aculife Healthcare (infusion and injectables) and Stericon Pharma (Contract Development and Manufacturing Organization)
• Samvardhana Motherson <> SAS Autosystemtechnik for $578m: SAS Autosystemtechnik is a provider of assembly and logistics services for the automotive industry. The acquisition would make Motherson Group, the leading assembler of cockpits modules globally, with a focus on EV models; and add 5,000 employees to the group
• AU SFB <> Fincare SFB for $529m: AU is the largest SFB, while Fincare is the 7th largest SFB. 60% of Fincare’s assets are microfinance loans, with a strong presence in Southern India

Big moves from PE and Sponsor Investors’ ecosystem

• Temasek <> Manipal Hospitals (41% stake) for $2bn: Temasek acquired an additional 41% stake in Manipal Hospitals from TPG and other investors, boosting its stake to 59%. Manipal serves over 5m patients per year through 29 hospitals in 16 cities with 4,000 doctors
• BPEA EQT and ChrysCapital <> HDFC Credila (90% stake) for $1.3bn: HDFC Credila is India’s leading provider of tailored financing solutions for students pursuing academic studies in India and abroad. HDFC will retain the remaining 10% stake
• Qatar Investment Authority <> Reliance Retail (1% stake) for $1bn: Reliance Retail is the retail arm of billionaire Mukesh Ambani's Reliance Industries, nearly doubling its valuation to $100bn from its last funding round in 2020
• Brookfield Renewable <> Avaada Ventures (unknown stake) for $1bn: Funds to be utilised towards green hydrogen and green ammonia ventures. Avaada Group has diversified into manufacturing Green Hydrogen and Green Ammonia; expanded its footprint into the Solar PV supply chain with the manufacturing of solar cells and modules; and currently operates a renewable energy portfolio of ~4 GW with plans to reach 11 GW by 2026
• CPPIB <> ReNew Energy (14% stake) for $268m: CPPIB bought the stake from Goldman Sachs, increasing its stake to 52%. ReNew Energy Global is the Nasdaq-listed renewable energy company, which operates one of India's biggest renewable energy platforms – ReNew Power

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Big moves in the Start-up ecosystem

• Walmart <> Flipkart for $1.4bn: Flipkart is one of India's top online marketplaces, focusing on small towns and cities. Flipkart has pushed back its plans to go public in 2023.
• Titan <> Caratlane for $564m: CaratLane is an omnichannel startup that manufactures and sells jewellery items in India and the US; focuses on lifestyle jewellery including diamond studded jewellery. Mithun Sacheti has sold his 27% stake to Titan. Titan’s jewellery portfolio comprises brands such as Tanishq, Mia, Zoya and CaratLane
• CarTrade <> OLX India’s Business for $67m: OLX’s India business comprised of classifieds platform and consumer-to-business (C2B) operations of auto transaction business. The acquisition brought 68m average monthly visitors and 32m product listings annually to CarTrade’s platform; CarTrade’s employee count crossed 4,000. However, months after the acquisition, CarTrade shut down the C2B segment, citing its unit’s economic challenges. CarTrade continues to grow the classified business, which includes both auto and non-auto verticals
• Reliance Retail <> Ed-a-Mamma for $40m: Ed-a-Mamma is a D2C kids and maternity wear brand that sells products through its website, e-commerce platforms, and retail chains like Lifestyle and Shoppers’ Stop
• Swiggy <> LYNK Logistics for $39m: LYNK Logistics is an FMCG retail distribution company, that enables leading FMCG brands to grow their retail presence through its network of 1,00,000+ retail stores across the top eight cities of India, with a proprietary, integrated technology platform to manage retail distribution throughout the supply chain, including warehousing, inventory management and logistics operations
• RateGain <> Adara for $16m: Adara is a US-based data exchange platform to strengthen RateGain’s position as a viable tool for its clients’ commercial teams. Adara deployed AI to collate 24bn data elements across 130 countries, to help enterprises spur engagement with consumers and increase profitability

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Downturns are opportunities for bold moves that pay off when markets recover

While India has already hiked interest rates, further aggressive increases could result in M&A activity slowing down. As we’ve seen in the US and other markets, the large increase in interest rates starting in mid-2022 played a big role in M&A activity contracting by 36% globally.

During the 2008–2009 global financial crisis, companies in India that took portfolio actions outgrew their peers two to one in nominal earnings over the next five years. Across all economic cycles, companies that engage in frequent and material M&A achieve almost twice the total shareholder growth of non-acquirers.

With the potential for a downturn, companies need to develop a highly tailored integration approach that foremost protects the target’s business but that also lays the appropriate integration playbook for realizing synergies. Companies need to prepare for the reality that merger integration only increases the risk of attrition, as 38% of India-based executives experience challenges with talent retention after deal completion (vs. the global average of 30%). Companies need to combine both ESG and digital capabilities in dealmaking to drive multiple expansions. Both will remain long-term value creation hotspots over the next decade, and the best companies will make them key considerations in their M&A activity.

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Outlook for 2024

Investments and deals activity for India in M&A is likely to improve in 2024, particularly after the general elections. Some identified sectors likely to witness the most action in the deals space include healthcare, green energy, financial services and the digital economy including e-commerce.

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Well, that was a quick recap of 2023 M&As in India. The next article will be an introduction to a series of case studies called “Tata Group – The Globally Local M&A strategy”. Until then, thank you for your time. Please post your feedback and comments.

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Please find below all the information sources that have been instrumental to the above article, along with some additional reading materials. Gratitude to all the creators –

1.????? https://www.bain.com/globalassets/noindex/2023/bain_report_global_m_and_a_report_2023.pdf

2.????? https://www2.deloitte.com/in/en/pages/finance/articles/India-MnA-Trends-2023.html

3.????? https://www.thehindubusinessline.com/economy/indias-ma-activity-at-three-year-low-of-84-b-in-2023/article67706500.ece

4.????? https://www.financialexpress.com/business/industry-mampa-activity-falls-to-14-58-bn-in-2023-lowest-in-12-years-3314574/

5.????? https://www.forbesindia.com/article/take-one-big-story-of-the-day/india-ma-deal-activity-slides-but-2024-outlook-better-experts/90485/1

6.????? https://inc42.com/features/the-big-moves-of-2023-a-look-back-at-the-biggest-acquisitions-in-the-startup-ecosystem/

7.????? https://www.cnbctv18.com/market/stocks/2023-blockbuster-year-block-deal-makers-private-equity-venture-capital-exit-18632271.htm

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